3 Etsy Analysts On Q3 Results: 'TAM Is Likely In The Trillions'

Etsy, Inc. ETSY shares were trading lower Thursday, despite the company reporting a third-quarter earnings and sales beat Wednesday. 

One sell-side analyst said Thursday that COVID-19 has materially accelerated the platform’s total addressable market into the trillions.

The Etsy Analysts: Morgan Stanley analyst Lauren Schenk maintained an Underweight rating on Etsy and raised the price target from $68 to $74.

Needham analyst Rick Patel reiterated a Buy on Etsy and raised the price target from $150 to $155.

KeyBanc Capital Markets analyst Edward Yruma maintained an Overweight on Etsy and raised the price target from $150 to $160.

The Etsy Takeaways: Etsy is a “compelling long-term story,” said Needham's Patel, adding that the company could drive gross merchandise sales growth of 20% over the long-term.

“While Etsy initially defined its TAM [total available market] to be $100 billion based on ‘special’ or handmade/craft products, its performance during the COVID-19 pandemic shows that its TAM is likely in the trillions, in our view, as it gains market share in more traditional product categories,” the analyst said. 

Why Etsy Accelerated During COVID-19: Before the pandemic, Morgan Stanley was skeptical of whether Etsy's margin and revenue targets were achievable, Schenk said in a note.   

COVID-19 has materially accelerated Etsy's business, the analyst said, adding that she remains skeptical that Etsy's new cohort of buyers will look materially different than cohorts of the last several years in terms of retention (15%-20%) and purchase frequency.

Morgan Stanley sees a material risk to the downside from here, she said.

Lasting Habitual Customer Behaviors: “Etsy has demonstrated some of the strongest performance in our coverage during COVID-19, but we think repeat and habitual customer behaviors will prove to be lasting,” KeyBanc's Yruma said in a note. 

Active buyer growth remains strong, and habitual buyers were up 104%, the analyst said. 

KeyBanc increased its estimates for the fourth quarter and raised the price target to $160 due to continued strength in the core marketplace.

ETSY Price Action: Etsy shares were trading down 4.21% at $133.76 at last check Thursday. 

The stock has a 52-week high of $154.88 and a 52-week low of $29.95.

Related Link: Etsy Purchases Reverb For $275M

Photo courtesy of Etsy.